Wall Street futures fell on Monday and the benchmark S&P 500 was set to confirm a bear market as investors piled into government bonds on worries over the ramifications of U.S. President Donald Trump's sweeping tariff plans.
The 10-year U.S. Treasury yields fell to 3.986%, with investors pricing in a chance of a fifth interest-rate cut from the Federal Reserve this year.
Futures, however, cut losses sharply from earlier in the session. S&P 500 E-minis were now down 120 points, or 2.35%, Nasdaq 100 E-minis were down 476.5 points, or 2.72%, and Dow E-minis were down 805 points, or 2.09%.
"What we're seeing is more of a technical bounce after a very steep selloff, but it's not necessarily the end of the selloff," said Fiona Cincotta, senior market analyst at City Index.
"For that to happen, we would need to see fundamental changes such as Trump walking back some trade tariffs or some sense that the global economy will perform okay regardless, or central banks stepping in to support economies."
S&P 500 futures are down more than 20% from their peak, suggesting the benchmark index (.SPX), opens new tab is heading toward bear market territory. If the index ends down 20% from its all-time closing highs, it would confirm the index has been in a bear market since February.
Futures linked to the Dow also fell 20% from their record high.
Trump announced hefty tariffs against U.S. trading partners last week, sparking retaliation from China and fueling concerns that the trade war will impede economic growth and stoke inflationary pressures.
In the two sessions after Trump's tariff decision, the S&P 500 has tumbled 10.5%, erasing nearly $5 trillion in market value, marking its most significant two-day loss since March 2020.
Trump told reporters late on Sunday that investors must endure the consequences and that he would refrain from negotiating with China until the U.S. trade deficit is addressed.
The steep global sell-off continues, so how should investors handle it?
Futures tracking the U.S. small-cap Russell 2000 index tumbled 3%, underscoring concerns about the health of the domestic economy.
The CBOE Volatility Index (.VIX), opens new tab, seen as Wall Street's fear gauge, was up 3.14 points to 48.45.
Stocks fell across the board in premarket trade, with megacaps continuing to bear the brunt. Apple (AAPL.O), opens new tab fell 3.6%, Nvidia (NVDA.O), opens new tab lost 5.1%, while Amazon.com (AMZN.O), opens new tab shed 2.9%.
Howmet Aerospace (HWM.N), opens new tab dropped 5.2%, after a report said the aircraft parts supplier may halt some shipments if they are impacted by Trump's tariffs.
The sharp declines in the past two sessions pushed the tech-heavy Nasdaq (.IXIC), opens new tab into bear market, while the Dow Jones Industrial Average (.DJI), opens new tab slumped more than 10% from its record-closing high.
The fear of a tariff-led recession caused markets to bring into play the chances of an interest-rate cut in May, with traders seeing a 51% possibility, according to data compiled by LSEG.
Goldman Sachs raised the odds of a U.S. recession to 45% from 35%, the second time it has increased its forecast in a week.
Several speeches by Fed officials and a series of economic indicators, including consumer price data, are slated throughout the week, with markets keenly observing any signals of recessionary fears.
